“If you aim for nothing, you’ll hit it every time.”
This is one of my favorite sayings, and it definitely applies to your Real Estate goals. If you go in head first without a plan, can you make a success of it? Maybe. But it isn’t likely! More times than not Investors end up with more than just egg on their face—everything from cracked foundations to legal problems to massive tax bills even their heir’s heirs have trouble paying off.
The better strategy is to take a step back and strategically design your Real Estate Investment Portfolio to fit your life and fulfill your dreams. Remember—YOU should own the property; the property shouldn’t own you.
When designing a successful Real Estate Investment Portfolio there are a few things you’ll want to think about:
1. Can I afford it? If I go in so deep in on the purchase that I’ve committed all of my reserves, what happens if I find a problem? If I’ve left myself no safety net even the most mundane plumbing problem can throw panic into my family and finances. It’s not good to hear more complaints about your investment from your spouse than from your tenant, is it?
Conclusion: No matter what it costs, be sure you have reserves or consider not doing it at all.
2. Do I have the emotional equity? I need to be sure that if I get a 3 a.m. tenant call that it won’t cause WWIII between me and my spouse. Plus, I better have a list of vendors who will take my 3 a.m. call (if not, get the list from Barry). How many of those calls can I handle before I snap? Should I even be considering a property that could get a 3 a.m. call?
Conclusion: Have I counted the emotional cost and can I afford it?
3. Do I have an operating strategy consistent with my personality? Should I be collecting rents, paying bills, ordering vendors—or have a management company handle the day to day operations? Am I better off in residential investments, which tend to generate marginal cash flow but frequently in growth markets make huge equity gains? Or am I better off in retail/office or industrial which are more “by the numbers” with generally defined returns but maybe subject to huge economic swings (e.g. Inflation driving down the value of the property or 100% vacancy for an extended period)?
Conclusion: My personality will usually define the property most suited to me.
Remember, as Shakespeare said, “To thine own self be true.”